Fibonacci Retracement: Levels, How to Draw Them and What the Data Says

Fibonacci retracement is one of the most widely used tools in technical analysis. It splits a price move into fixed percentages and shows where a pullback might pause before the trend resumes. That is where many traders look for their entries, stops and targets.

I use Fibonacci levels in my own chart analysis every day, and I also know what the data says against them. This guide shows how the levels are calculated, how to draw them in TradingView, how I trade a retracement with confluence and a stop at the structure, and what a ten-year test found when it compared the levels with random data. This article follows our editorial policy.

Fibonacci retracement in 30 seconds

• Possible support and resistance: retracement levels mark zones inside a pullback where price might react. They come from ratios of the Fibonacci sequence.
• The core levels: 38.2%, 50% and 61.8%. Traders call 61.8% the golden level because it is the inverse of the golden ratio.
• How to draw it: in an uptrend from the swing low to the swing high, in a downtrend the other way round. TradingView does it for free in a few clicks.
• Not a signal on its own: a level becomes tradable only with confluence, a reaction of the candles and a stop at the structure.
• The honest part: a test of stocks, futures and currencies found no clustering of turns at Fibonacci ratios. Use the levels as a frame, not as a forecast.

What is a Fibonacci retracement?

A Fibonacci retracement is a technical analysis tool that marks possible support and resistance zones inside a pullback with the percentages 23.6%, 38.2%, 50%, 61.8% and 78.6%. The idea is simple: no trend moves in a straight line. After a strong move, a counter move usually gives back part of the way. The tool splits the original move into fixed percentages and shows you how deep the pullback has gone.

The ratios come from a sequence of numbers described by Leonardo of Pisa, known as Fibonacci, in his book of 1202. In the Fibonacci sequence each number is the sum of the two before it: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89 and so on.

Divide a number by the one after it and you get closer and closer to 0.618. That is the inverse of the golden ratio of about 1.618, and it is where the 61.8% level comes from. Divide a number by the one two places later and you get about 0.382, three places later about 0.236. As Adam Grimes explains, these ratios come from the adding process itself, not from the specific numbers.

Two levels are not Fibonacci ratios in the strict sense. The 50% level is not a Fibonacci number at all, but many traders watch it as a halfway mark. The 78.6% level is the square root of 0.618.

The Fibonacci levels at a glance

Each level is read differently on the chart. The descriptions below are how traders commonly use them, not measured hit rates.

Level	How traders read it
23.6%	Shallow pullback, watched mainly in very strong trends
38.2%	First core level, a shallow pullback in a fast trend
50%	Not a Fibonacci ratio, but widely watched as the halfway mark
61.8%	The golden level, seen as the key retracement
78.6%	Deep pullback, the last level before the swing low

The golden pocket is the price zone between the 61.8% and the 65% retracement. The name is trader slang for the area just beyond the golden level. Many traders watch it closely in a pullback, but it is a popular zone, not a proven one. Our guide to swing trading uses the 50 to 61.8% zone as one of four setups.

Treat every level as a zone, not as an exact line. Price does not have to hit a level to the tick. It often turns a little before it or runs a little past it, as the EUR/USD example below shows.

How to calculate Fibonacci retracement levels

You never have to calculate the levels by hand, every charting platform does it for you. To understand what the tool draws, here is the formula for an uptrend:

Retracement level = swing high − (swing high − swing low) × Fibonacci ratio

A real example from the EUR/USD daily chart of January 2026. The euro rose from a swing low of 1.15788 on January 19 to a swing high of 1.20830 on January 27, a range of 0.05042, about 504 pips:

• 38.2% level: 1.20830 − 0.05042 × 0.382 = 1.18904
• 50% level: 1.20830 − 0.05042 × 0.5 = 1.18309
• 61.8% level: 1.20830 − 0.05042 × 0.618 = 1.17714

And this is how it played out. The February pullback bottomed at 1.17657 on February 6, about six pips below the 61.8% level, and turned up. Two weeks later price dipped again, to 1.17423 on February 19. The level worked as a zone, not as a line. The later low of 1.17423 shows why a tight stop near 1.1771 could be triggered.

Downtrend: the SPY rebound of 2025

In a downtrend the calculation is mirrored. You draw the tool from the swing high to the swing low, and the levels show how far a rally can go before it may turn into a selling zone. In the formula, add the share of the range to the swing low instead of subtracting it from the high.

The SPY example shows both sides of that idea. After the sell-off from 613.23 on February 19, 2025 to 481.80 on April 7, the 50% level sat at 547.52 and the 61.8% level at 563.02. On April 9, SPY rallied 10.5% in one day and closed at 548.62, about one dollar above the 50% level. The next day it fell back, down to 508.46 on April 21. This is a selected chart reaction, not a tested short trade.

The second rally did not care. On May 2, SPY closed at 566.76, above the 61.8% level, and kept rising toward the old high. The selling zone held once and failed the second time. That is why the stop belongs at the structure, above the swing high of the rally, and not somewhere inside the zone.

Fibonacci calculator: retracement and extension levels

Enter a swing high and a swing low, and the calculator gives you every retracement level at once. Choose the trend first: in an uptrend the levels are measured down from the swing high, in a downtrend up from the swing low. If you also enter point C, the end of the pullback, you get the three extension targets as well. The start values are the SPY swing from the extension example further down.

Updates as you type. Use a dot for decimals (1.20830). A comma only as a thousands separator together with a dot (4,643.00).

TrendUptrendDowntrendSwing highSwing lowC, end of pullback

Level	Price
Retracement levels
0% (swing high)	755.58
23.6%	746.38
38.2%	740.68
50%	736.08
61.8%	731.48
78.6%	724.93
100% (swing low)	716.58
Extension targets from C
61.8%	753.20
100%	768.10
161.8%	792.20

Retracement: uptrend = high − range × ratio, downtrend = low + range × ratio. Extension targets use the A-B range from point C (three-point extension), so a target can lie below, at or beyond the old high; a target below zero is not shown as a price. Prices from 0.0001 to 1,000,000 with up to five decimals; results are rounded half away from zero to the decimals you enter, between two and five. Calculated levels, not a forecast.

The calculator only does the arithmetic; the hard part is the swing you feed into it. Use the same swing rule every time, and check the result against your chart. Nothing you type is stored or sent anywhere; the calculation runs in your browser.

How to draw Fibonacci retracement in TradingView

TradingView is a charting platform many private traders use, and the Fibonacci tool is included in every plan, free ones too. I have used the platform every day since 2017. If you are new to it, my TradingView guide explains the basics.

Step 1: open the tool

Click the Fibonacci icon in the left toolbar. You can also find the tool in the menu of drawing tools under “Fib Retracement”.

Step 2: pick a clear swing

Look for a clear move between an obvious low and an obvious high. The clearer the swing, the easier it is to apply the same rule every time. Small, unclear moves only fill your chart with lines.

Step 3: drag the tool across the swing

In an uptrend, click the swing low and drag to the swing high. In a downtrend, click the swing high and drag to the swing low. TradingView draws the levels for you.

Step 4: adjust the settings

Double-click the drawing to open the settings. There you can switch levels on or off, change colors, fill the zones and extend the lines to the right. The tool allows up to 24 Fibonacci levels, including 0% and 100%. For a start, the five standard levels are enough.

My Fibonacci strategy: how I trade retracements

A Fibonacci level is never a buy signal for me on its own. It is a map: it shows me where I wait for the market to react. Whether I trade there depends on three things: the larger trend, the confluence in the zone and what the candles do at the level.

What follows is a decision framework for discretionary trading, not a backtestable strategy. It fixes the order of my decisions. The exact trigger, time frame and order type are yours to define and test.

1. Trend first: I trade retracements only in the direction of the larger trend. In an uptrend I buy pullbacks, in a downtrend I sell rallies. Against the trend, a Fibonacci level is just a number.
2. Zone, not line: I pay most attention to the zone between 50% and 61.8%. A pullback to 38.2% in a very strong trend can also be tradable. Neither zone guarantees a turn.
3. Wait for a reaction: I do not enter blindly at the level. I wait for a reversal bar, a candlestick pattern or a quick recovery after a stop run below the level. The signal is the close of that bar, not an intraday touch.
4. Define the trade after the close: for a long, a buy stop one tick above the signal bar’s high; for a short, a sell stop one tick below its low, valid for the next session only. On a daily FX chart the bar closes at 5 p.m. New York time, and the first executable quote after that close counts as the open.
5. Opening check: if the market opens beyond my invalidation or already beyond my planned entry, I skip the trade. Otherwise the stop order goes in. Quantity and stop distance are calculated from the planned entry; a worse fill means a larger real risk.
6. Invalidation at the structure: for a long trade I define invalidation below a specific pullback low, for a short above a specific rebound high, and the protective stop goes just beyond that point. A stop based on a Fibonacci percentage, such as below 78.6%, is a separate exit rule that I test, not proof that the trend has ended.
7. Target: my first target in an uptrend is the old high. If the market runs beyond it, I project further targets with the Fibonacci extension, explained below.

Every trade needs a planned loss in money before the order goes in. The formula is: planned loss = shares × stop distance × point value. For stocks the point value is 1. With 100 shares and a stop $3.00 away, the planned loss is 100 × $3.00 × 1 = $300. A gap or a fast market can make the real loss larger than planned, so keep each planned loss to a small, fixed share of your account.

Confluence: the most useful filter

Confluence means that several independent technical reasons meet at the same price, for example a Fibonacci level and an old support zone or a trendline. In my experience a level is worth more when something else sits there too: an old support or resistance zone, a trendline, a moving average or a prior day’s high or low. How to find those zones is covered in my guide to support and resistance.

The DAX example shows such a case from the spring of 2026. The index fell from 25,406 on February 27 to 21,864 on March 23. The 61.8% retracement of that drop sat at 24,053, inside the band of the December lows from 23,924 to 24,173. On April 8 the rally reached 24,164, inside the band, and turned down to 23,482 on April 13. Nine days later it went straight through the zone to 24,792. Confluence gave a reaction, not a turning point for good.

Which time frame you use is up to you. The tool works the same on a 5-minute chart and on a weekly chart. My experience is that levels on higher time frames carry more weight with me. A weekly level and a five-minute trigger can be combined if the roles of both time frames, the invalidation and the position size are defined in advance.

Fibonacci extension, fans and time zones

Besides the retracement there are more Fibonacci tools. I use the extension regularly for targets; the others you should at least know.

Fibonacci extension: targets from the pullback

A three-point Fibonacci extension projects targets from the end of a pullback using multiples of the prior move, typically 61.8%, 100% and 161.8%. The retracement measures how deep a pullback goes; the extension asks how far the next leg can run. You need three points: the start of the move (A), its end (B) and the end of the pullback (C). The tool adds the A-B distance, multiplied by each ratio, to point C. Depending on the depth of the pullback and the ratio, a target can lie below, at or beyond B. Extending the two-point retracement tool beyond 100% is a different calculation.

The SPY example from the summer of 2026 shows two hits and one miss. The swing ran from 716.58 on June 26 (A) to 755.58 on July 15 (B), the pullback ended at 729.10 on July 29 (C). The targets were 753.20 at 61.8%, below B, 768.10 at 100% and 792.20 at 161.8%. SPY reached the first two on August 3 and 4. Through August 31, the end of the chart, the high was 779.37 on August 13, short of the third target.

That is how I use extension targets: as places to take profit, not as promises. I take part of the position at the first targets and do not wait for the last one to be hit.

Fibonacci fan: sloped instead of flat

A Fibonacci fan consists of lines drawn from the start of a swing through the 38.2%, 50% and 61.8% retracement prices at the end of the swing. The difference to the retracement: the fan lines are sloped, not horizontal. In an uptrend they rise with time, so a pullback could run sideways into a fan line instead of falling deep.

In the EUR/USD example, the fan did not hold. Drawn from the January 19 low through the retracement prices at the January 27 high, the three lines were steep. The pullback closed below the 38.2% line on January 29 and below the other two on January 30. On February 2 the close of 1.17908 sat below all three lines. The price that held was the horizontal 61.8% level at 1.17714. A steep swing makes steep fan lines, and those break easily.

Arcs and time zones

For completeness: there are also Fibonacci arcs and Fibonacci time zones. Arcs draw the levels as curves around the swing; time zones are vertical lines at intervals of Fibonacci numbers that are supposed to mark possible turning dates. In practice both play a minor role. My advice: master the retracement and the extension first.

Pros and cons of Fibonacci trading

Like every tool, the Fibonacci retracement has two sides. Here is my honest summary from daily practice:

Pros	Cons
Fixed map: once the swing is chosen, the levels are fixed. That stops random gut-feeling entries	Subjective anchors: two traders pick two swings and get two different sets of levels
Works in many markets and time frames without settings	No proven edge: a ten-year test found no clustering of turns at the levels
Complete risk frame: level, structure stop and extension target give you a full reward-to-risk plan	Hindsight trap: draw enough levels and every turn looks like a hit afterward
Common language: many traders watch the same levels, so analyses are easy to compare	No timing: the level tells you where a reaction is possible, not when

Common Fibonacci mistakes

I see the same mistakes with beginners again and again. If you avoid them, you are ahead of most traders.

The most common pair is wrong anchors and crowded charts. The tool is dragged across tiny swings, and five retracements on top of each other create levels everywhere, which means no information at all. Use only obvious highs and lows that anyone would see at once, and stick to one swing per time frame.

The second group is psychological. Many beginners read a level as a guarantee instead of a zone, and buy a deep retracement against a downtrend because it looks like a bargain. Without a reaction in the price action, a 61.8% level is only a line, and against the trend it is more likely a selling zone. Reading that reaction is the subject of my guide to price action trading.

Then there are two craft mistakes. First, the stop exactly at the level: other traders may place their stops there too, and a quick run through the level can trigger them. The stop belongs below the structure. Second, a level without a plan for the case that it breaks. A level that gives way often leads to a breakout in the other direction.

How reliable are Fibonacci retracements?

Time for the part many Fibonacci guides leave out: I know of no solid evidence that the levels work better than other price levels. The American trader and author Adam Grimes measured pullbacks in 600 stocks, 16 futures markets and 6 currencies on daily data over ten years starting in 2001. The average pullback retraced about 65% of the prior move, with a very wide spread, and there was no clustering at Fibonacci ratios. Randomly generated price data looked much the same (Testing Fibonaccis, Adam Grimes). His comparison does not test every entry rule, confluence filter or strategy.

So why do I still use them every day? For three reasons. First, the levels give me a fixed frame to classify a pullback. A pullback to 38.2% tells a different story about the strength of a trend than one to 78.6%, whether or not the number is special. Second, many traders watch the same zones. It is quite possible that orders gather there for that reason, a small self-fulfilling prophecy, but that effect has not been measured. Third, combined with confluence and a stop at the structure, I do not need a magic hit rate. I need zones where I can limit my risk in a tight and logical way. The levels do that.

My conclusion after decades in the market: do not give the numbers mystical power. Use them as what they are: a way to organize price action, not an oracle.

Conclusion: a map, not an autopilot

The Fibonacci retracement is a useful tool of technical analysis if you put it in its place. It gives you a map of possible reaction zones in seconds, works in every liquid market and time frame, and forces you to make structured decisions: define the swing, wait for the zone, see a reaction, put the stop below the structure, project the target.

What it is not: a signal with a guarantee. If the levels work, they probably work because many traders look at them. Treat them as zones of higher attention, always ask for confluence and a reaction of the candles, and limit every risk at the structure. Then a famous number sequence becomes a tool instead of a superstition.

Frequently asked questions about Fibonacci retracement

What is a Fibonacci retracement?

A Fibonacci retracement is a technical analysis tool that marks possible support and resistance zones inside a pullback. It is based on ratios from the Fibonacci sequence and uses the levels 23.6%, 38.2%, 50%, 61.8% and 78.6%. Traders use it to judge how deep a pullback has gone before the trend may resume.

Why is 61.8% called the golden ratio?

Because 0.618 is the inverse of the golden ratio of about 1.618. If you divide a number of the Fibonacci sequence by the one after it, the result comes closer and closer to 0.618. Traders call the 61.8% retracement the golden level; that it holds more often than other levels is not proven.

What is 0.382 in Fibonacci?

0.382 is the ratio you get when you divide a Fibonacci number by the one two places later in the sequence. It is also 1 minus 0.618. On the chart it becomes the 38.2% retracement, the first core level, which traders watch in fast trends with shallow pullbacks.

Is the 50% retracement a Fibonacci level?

No, 50% is not a Fibonacci ratio. It is included in almost every Fibonacci tool because many traders watch the halfway mark of a move. Together with 61.8% it forms the zone I pay most attention to.

How do you calculate a Fibonacci retracement?

In an uptrend: level = swing high − (swing high − swing low) × ratio. With a rise in EUR/USD from 1.15788 to 1.20830, the 61.8% level is 1.20830 − 0.05042 × 0.618 = 1.17714. In a downtrend, add the share of the range to the swing low instead. In practice your charting software calculates the levels as soon as you drag the tool across the swing, or you use the calculator above.

How do you draw a Fibonacci retracement in TradingView?

Open the Fibonacci tool from the left toolbar. In an uptrend, drag it from the swing low to the swing high; in a downtrend, from the swing high to the swing low. The levels appear automatically. Double-click the drawing to change levels and colors.

Is the Fibonacci strategy profitable?

Fibonacci alone is not a strategy, and a statistical edge of the levels over random levels has not been shown. Results depend on your swing choice, your trigger, your stop, costs and the market. As a building block with confluence, a reaction of the price action and a stop below the structure, it can be part of a disciplined plan. Test your exact rules before you risk money.

What is the difference between Fibonacci retracement and extension?

The retracement measures how far price moves against the trend and gives you entry zones. The extension projects targets from the end of the pullback, typically at 61.8%, 100% and 161.8% of the first move; depending on the pullback, a target can lie below, at or beyond the old high. Together they give you a frame for entry and target.

Does Fibonacci retracement work in all markets?

You can apply the tool in every liquid market: stocks, indexes such as the S&P 500 or the DAX, forex, commodities and crypto. It works the same on every time frame, from minute charts to weekly charts. In my experience, levels on higher time frames and in liquid markets carry more weight.

This article was written by Karsten Kagels, a discretionary price action trader. The German edition was reviewed by Christian Möhrer. The chart examples are historical and built from Interactive Brokers and Yahoo Finance data; they are selected to explain the tool, are not trades I executed and are not a statistic. This is educational content, not investment advice. Trading can lose you money, costs and slippage reduce results, and leverage in forex or futures magnifies losses as well as gains.